Sun CEO McNealy steps down

Sun Microsystems CEO Scott McNealy has stepped aside as head of the company.

By
Patrick Thibodeau and Robert McMillan
, | 25 Apr 06

Sun Microsystems CEO Scott McNealy has stepped aside as head of the company, an announcement made the same day that Sun reported a loss of $217 million for its most-recent fiscal quarter.

McNealy announced that Jonathan Schwartz has been chosen by the board to take over as CEO, effective immediately. Schwartz had been serving president and chief operating officer.

As far as financial news goes, Sun's revenue for the third quarter of fiscal 2006, which ended on March 26, rose 21 per cent year over year, totalling $3.2 billion for the period. Revenue was buoyed by its recent StorageTek acquisition.

The $217 million loss included $87 million in charges related to acquisitions, as well as $93 million in compensation and restructuring charges, Sun said. In its third quarter last year, the company lost $28 million.

Sun has failed to recover from the end of the dot-com boom, and the company has posted a string of losses or near-break-even results over the past five years. With its stock also suffering, in recent weeks there had been growing speculation that the company would experience a shake-up.

The company was slow to realise the threat posed by x86 systems, but has since worked to change course, developing new servers and increasing the capability of its Sparc systems with multi-threaded, multi-core chips that run at low wattage.

The change in leaders announced Monday "indicates that the financial market had finally come to the end of its patience more than anything," said Charles King, an analyst at Pund-IT: "The company has had a really tough time over the last three or four years."

McNealy has also had a public presence as one of the more visible figures in the industry and was often outspoken, especially when the company was involved in antitrust litigation with Microsoft. "In a way, a high profile can be as much of a curse as it is a blessing," said King.

He called Schwartz's appointment "a conventional choice. It's a Sun-friendly choice," he said. "He is a new enough face that I think the investors can probably live with it for a year, but he's really going to be under a microscope."